Despite headlines about hedge funds that got decimated after making complicated bets on mortgages or energy, the most basic investment strategy of picking which stocks will rise and which will fall – known as long-short equity strategy – is turning out to be one that’s giving hedge-fund managers fits.

Indeed, hedge funds are finding that today’s choppy markets are proving to be tougher to navigate than the terrible years following the dot-com bubble burst in 2000. And it helps to explain why so many hedge funds have called it quits and instead are moving into cash.

The hedge-fund industry is seeing its worst results in recent memory, down an average of 4.09 percent year-to-date, according to the Hennessee Hedge Fund Index. Long-short equity funds, rarely expected to be losers, are nevertheless down 3.2 percent for the year.

The case of New York hedge fund Sage Opportunity bears this out.

A small fund that manages just a few hundred million dollars in assets, Sage has a strong record of weathering difficult markets.

Until now. Through August, Sage was down 26.8 percent compared with the S&P 500 index, which was down 11.4 percent, according to an investor letter obtained by The Post.

It’s the fund’s worst year since it opened in 1997, and represents a significant reversal of fortune for Sage, which outperformed the broader market during the dot-com bust eight years ago.

While others got wiped out by the tech-sector implosion (the S&P 500 fell 9 percent), Sage returned a whopping 33 percent.

Before now, Sage’s only down year was in 2002, when its returns sank 13.7 percent. By comparison, the S&P 500 fell a whopping 22 percent.

Officials from Sage declined to comment for this story, but it’s clear from its letter to investors that the fund has been caught up, like a lot of hedge funds, in the schizophrenic turbulence of the market, which rallies one day and plummets the next.

“The bursting of the Nasdaq bubble had some rationale,” explained Charles Gradante, co-founder of Hennessee Group, which tracks fund performance.

“In this case the golden rules of the market – like oil coming down should be good for all corporations – is not happening,” he said, adding that the changing climate is due, in part, to indiscriminate selling as a result of the credit crunch.